Exclusion in terms of both efficiency and equity

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Some states exclude necessities, such as food and clothing, from their sales tax. Other states do not.

Discuss the merits of this exclusion in terms of both efficiency and equity.

Consider your own home state, does it exclude necessities, why or why not?

As with all things, one decision can lead to another. Once necessities are excluded, "necessities" must be defined. Research the tax definition of "necessity" in your state (or another if your state does not exclude) and evaluate it.

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Majority of the states imposes tax on the luxury as well as on the necessity products.The necessity goods are exempted from the tax by many states as these goods are referred as the normal goods which are mainly bought by the lower income people. This is done by the states to ensure equality in the tax system and to save the lower income people from the tax burden on the necessities, otherwise their all income will be spent on paying the tax on the normal goods.

Reference no: EM132344266

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